What to Know Before Selling Your Company
Selling a business is a monumental decision that can shape your future in profound ways. It’s not just about the financial transaction; it’s about the legacy you leave behind and the new chapter you’re about to begin. Here are some key points to keep in mind before selling your company:
Opportunity Costs, Readiness and Life Goals
Before you even get started on the steps to selling your business it’s crucial to ask yourself these questions:
- What are the opportunity costs? Selling your company comes with an opportunity cost. You might be giving up future opportunities or the chance to work on a particular project. If a sale means missing out on something significant, consider including provisions in the sale contract that allow you to retain certain rights or opportunities.
- Are you ready to sell? You will want to make sure that both you and your business are ready. Have you addressed the weaknesses in your company that could prevent you from maximizing its value? Are you mentally and emotionally prepared to sell?
- What will you do after? Selling your company is going to leave a gap in your life. How will you fill it? Will you start a new venture, retire, or take some time off to travel and reconnect with loved ones? No matter what, knowing the answer to this question will help you plan the sale of your company with a clear focus.
Finances & Records
When looking to sell your company you will want to make sure you have your finances and financial records in order. Your personal and business finances should be separate. Although mingling them may sometimes minimize your taxable income, failing to keep them separate could result in legal concerns, cause issues for your company’s valuation, and create problems for your buyers when they try to obtain financing. Additionally, your financial records should be clean, organized and show operating costs as well as revenue.
Right Deal Structure and Tax Implications
The purchase price of your company is only one aspect of the deal, you will also need to consider the form of consideration (cash, stock, debt), the division of liabilities and risks between you and the new owner, as well as what the process will be in case you need to amend or terminate the sale. You should understand the tax implications of selling your company, and explore strategies to minimize the tax burden. Different transaction structures can have varying tax consequences.
Continuity and Legacy
If you have employees, you will want to consider how selling your company will affect them. Will they keep their jobs? Will they retain their current salary? The retention of key employees is an important consideration as these employees not only add value to the company, they are also important for continuity. If possible you should strive to come to a deal that is beneficial to your employees.
Your business is a reflection of who you are. Think about the legacy you’ve built, and find a buyer who will carry it on. Ideally they should maintain the quality, brand, and mission statement of your business. This is especially important if your name remains attached to the business.
Work with a Professional
Selling your company encompasses multiple different considerations, from valuation and readiness to tax implications and employee retention. With so many things to consider, one of the wisest things you can do when selling your company is to work with a professional. Financial advisors like the wealth managers at PFS Signature Wealth can guide you through the process, helping you make informed decisions, reduce tax liability, manage risks, and ensure post-sale success.
Conclusion
Selling your company is not only a financial transaction, it’s a multifaceted process that requires careful planning and consideration. By addressing these key points, you can help ensure a smooth transition and set the stage for your next great adventure.
Thinking about selling your company and wondering if we’re a mutual fit? Contact us today to schedule a conversation with our team.